Global markets were higher on Friday as US shares were boosted by better-than-expected job growth in March (with the unemployment rate holding near a 49-year low), which eased concerns of an economic slowdown & saw the S&P 500 rise for a 7th consecutive day
US President Donald Trump also said on Friday that the US had found agreement on some of the toughest issues in its trade talks with China, but sticking points remained.
Stock in Focus: Summerset (SUM:NZX / SNZ:ASX)
Summerset shares were down -7% on Friday after the retirement village operator announced first quarter sales dipped -4.2% from last year as it begins to see an impact from a slowing property market in Auckland and Christchurch.
Summerset said it sold 137 occupation rights in the first three months of the year, of which 71 were new sales (up +4.4%) and resales of 66 (down -12%) with settlement times increasing. Earlier, Summerset reported their 2018 full year result, posting reported net profit after tax of $214.5 million (which includes unrealised valuation gains), which was down -11% from last year due to lower level of retirement unit pricing increase. Underlying profit (which excludes the impact of unrealised movement in the fair value of investment property) was $98.6m up +21% from the previous year. This was due to record development margins and record number of units built within the year as well as strong resale gains on existing units.
Having achieved substantial growth in the past, the tailwind of rising property prices is likely going to become a headwind over the medium-term. While demand for retirement villages will likely remain strong, any weakening in the property market will weigh on operating profit growth over the near term, tightening Summersets margins on both new builds and resales.
We currently have a HOLD recommendation on Summerset.
Australia & New Zealand Market Movers
The Australian share market fell again on Friday (ASX 200 index -0.83%) with losses on Thursday and Friday seeing the ASX end the week flat. Tech stocks were the hardest hit sector, but buy-now, pay-later companies Afterpay Touch and Zip Co both hit all-time highs following reports earlier in the week that Australian retail sales had bounced back in February.
The New Zealand market was lower on Friday (NZX 50 index -0.36%) as the market continued to consolidates after hitting fresh all-time highs. The NZ market led lower by retirement village operator Summerset Group, and rivals Ryman Healthcare and Metlifecare suffered accordingly. NZX shares were unchanged as the stock market operator outlined its cost-cutting programme at its annual meeting, saying it has cut costs by almost 27 percent since the end of 2016 and estimates expenses will fall a further 5.5-8 percent this calendar year.
3 Things Markets Will be Watching this Week
- This week marks the start of the US first-quarter reporting season.
- The European central bank makes an interest rate decision Wednesday night (AU/NZ time).
- The Reserve Bank of Australia’s semi-annual Financial Stability Review is released on Friday.
Have a Great Day,